Blackstone Mortgage Trust (BXMT)

Risks

• The ongoing COVID-19 pandemic could have an adverse impact on our financial performance and results of operations.
• Our loans and investments expose us to risks associated with debt-oriented real estate investments generally.
• Commercial real estate-related investments that are secured, directly or indirectly, by real property are subject to delinquency, foreclosure and loss, which could result in losses to us.
• Fluctuations in interest rates and credit spreads could reduce our ability to generate income on our loans and other investments, which could lead to a significant decrease in our results of operations, cash flows and the market value of our investments and may limit our ability to pay distributions to our stockholders.
• Prepayment rates may adversely affect our financial performance and cash flows and the value of certain of our investments.
• Difficulty in redeploying the proceeds from repayments of our existing loans and investments may cause our financial performance and returns to investors to suffer.
• We operate in a competitive market for lending and investment opportunities, which may intensify, and competition may limit our ability to originate or acquire desirable loans and investments or dispose of assets we target, and could also affect the yields of these assets and have a material adverse effect on our business, financial condition and results of operations.
• If we are unable to successfully integrate new assets or businesses and manage our growth, our results of operations and financial condition may suffer.
• The lack of liquidity in certain of our assets may adversely affect our business.
• Any distressed loans or investments we make, or loans and investments that later become distressed, may subject us to losses and other risks relating to bankruptcy proceedings.
• We may need to foreclose on certain of the loans we originate or acquire, which could result in losses that harm our results of operations and financial condition.
• Accounting standards have required us to increase our allowance for loan losses which has had an adverse effect on our business and results of operations and may in the future have a material adverse effect on our business, financial condition and results of operations.
• Control may be limited over certain of our loans and investments.
• B-Notes, mezzanine loans, and other investments that are subordinated or otherwise junior in an issuer’s capital structure and that involve privately negotiated structures will expose us to greater risk of loss.
• Loans on properties in transition will involve a greater risk of loss than conventional mortgage loans.
• Risks of cost overruns and noncompletion of renovations of properties in transition may result in significant losses.
• There are increased risks involved with our construction lending activities.
• Loans or investments involving international real estate-related assets are subject to special risks that we may not manage effectively, which could have a material adverse effect on our results of operations and financial condition and our ability to make distributions to our stockholders.
• A prolonged economic slowdown, a lengthy or severe recession or declining real estate values could impair our investments and harm our operations.
• Concerns regarding the stability of the sovereign debt of certain European countries and other geopolitical issues and market perceptions concerning the instability of the Euro, the potential re-introduction of individual currencies within the Eurozone, or the potential dissolution of the Euro entirely, could adversely affect our business, results of operations and financial condition.
• The U.K.’s exit from the E.U. could adversely affect us.
• The recent and expected discontinuation of currently used financial reference rates and use of alternative replacement reference rates may adversely affect net interest income related to our loans and investments or otherwise adversely affect our results of operations, cash flows and the market value of our investments.
• Transactions denominated in foreign currencies subject us to foreign currency risks.
• Our success depends on the availability of attractive investments and our Manager’s ability to identify, structure, consummate, leverage, manage and realize returns on our investments.
• Real estate valuation is inherently subjective and uncertain.
• Our loans and investments may be concentrated in terms of geography, asset types and sponsors, which could subject us to increased risk of loss.
• The due diligence process that our Manager undertakes in regard to investment opportunities may not reveal all facts that may be relevant in connection with an investment and if our Manager incorrectly evaluates the risks of our investments we may experience losses.
• Insurance on loans and real estate securities collateral may not cover all losses.
• The impact of any future terrorist attacks and the availability of affordable terrorism insurance expose us to certain risks.
• The properties underlying our investments may be subject to unknown liabilities, including environmental liabilities, that could affect the value of these properties and as a result, our investments.
• We may be subject to lender liability claims, and if we are held liable under such claims, we could be subject to losses.
• Our investments in CMBS, CLOs, CDOs and other similar structured finance investments, as well as those we structure, sponsor or arrange, pose additional risks, including the risks of the securitization process and the risk that the special servicer, CT Investment Management Co., LLC, or CTIMCO, a subsidiary of Blackstone, may take actions that could adversely affect our interests.
• Any credit ratings assigned to our investments or to us will be subject to ongoing evaluations and revisions and we cannot assure you that those ratings will not be downgraded.
• Provisions for loan losses are difficult to estimate.
• Some of our portfolio investments may be recorded at fair value and, as a result, there will be uncertainty as to the value of these investments.
• Our significant amount of debt may subject us to increased risk of loss and could adversely affect our results of operations and financial condition.
• Our secured debt agreements impose, and additional lending facilities may impose, restrictive covenants, which may restrict our flexibility to determine our operating policies and investment strategy.
• Our master repurchase agreements require, and bank credit facilities, repurchase agreements or other financing that we may use in the future to finance our assets may require, us to provide additional collateral or pay down debt.
• Our use of leverage may create a mismatch with the duration and interest rate of the investments that we are financing.
• We have utilized and may continue to utilize in the future non-recourse securitizations to finance our loans and investments, which may expose us to risks that could result in losses.
• We may be subject to losses arising from current and future guarantees of debt and contingent obligations of our subsidiaries or joint venture or co-investment partners.
• Hedging against interest rate or currency exposure may adversely affect our earnings, which could reduce our cash available for distribution to our stockholders.
• We are subject to counterparty risk associated with our hedging activities.
• If we enter into certain hedging transactions or otherwise invest in certain derivative instruments, failure to obtain and maintain an exemption from being regulated as a commodity pool operator could subject us to additional regulation and compliance requirements which could materially adversely affect our business and financial condition.
• We depend on our Manager and its personnel for our success. We may not find a suitable replacement for our Manager if the Management Agreement is terminated, or if key personnel cease to be employed by our Manager or Blackstone or otherwise become unavailable to us.
• The personnel of our Manager, as our external manager, are not required to dedicate a specific portion of their time to the management of our business.
• Our Manager manages our portfolio pursuant to very broad investment guidelines and is not required to seek the approval of our board of directors for each investment, financing, asset allocation or hedging decision made by it, which may result in our making riskier loans and investments and which could adversely affect our results of operations and financial condition.
• Our Manager’s fee structure may not create proper incentives or may induce our Manager and its affiliates to make certain loans or investments, including speculative investments, which increase the risk of our loan and investment portfolio.
• We and the Blackstone Vehicles have and in the future will likely compete with or enter into transactions with existing and future private and public investment vehicles established and/or managed by Blackstone or its affiliates, which may present various conflicts of interest that restrict our ability to pursue certain investment opportunities or take other actions that are beneficial to our business and/or result in decisions that are not in the best interests of our stockholders.
• Termination of our Management Agreement would be costly.
• Our Manager maintains a contractual as opposed to a fiduciary relationship with us. Our Manager’s liability is limited under our Management Agreement and we have agreed to indemnify our Manager against certain liabilities.
• We do not own the Blackstone or BXMT name, but we may use it as part of our corporate name pursuant to a trademark license agreement with an affiliate of Blackstone. Use of the name by other parties or the termination of our trademark license agreement may harm our business.
• Our investment strategy or guidelines, asset allocation and financing strategy may be changed without stockholder consent.
• We must manage our portfolio so that we do not become an investment company that is subject to regulation under the Investment Company Act.
• Rapid changes in the values of our other real estate-related investments may make it more difficult for us to maintain our qualification as a REIT or exclusion from regulation under the Investment Company Act.
• Changes in laws or regulations governing our operations, changes in the interpretation thereof or newly enacted laws or regulations and any failure by us to comply with these laws or regulations, could require changes to certain of our business practices, negatively impact our operations, cash flow or financial condition, impose additional costs on us, subject us to increased competition or otherwise adversely affect our business.
• State and foreign licensing requirements will cause us to incur expenses and our failure to be properly licensed may have a material adverse effect on us and our operations.
• Actions of the U.S. government, including the U.S. Congress, Federal Reserve Board, Treasury and other governmental and regulatory bodies, to stabilize or reform the financial markets, or market response to those actions, may not achieve the intended effect and may adversely affect our business.
• We depend on our Manager and its affiliates to develop appropriate systems and procedures to control operational risk.
• Operational risks, including the risk of cyberattacks, may disrupt our businesses, result in losses or limit our growth.
• Accounting rules for certain of our transactions are highly complex and involve significant judgment and assumptions. Changes in accounting interpretations or assumptions could impact our ability to timely prepare consolidated financial statements.
• If we do not maintain our qualification as a REIT, we will be subject to tax as a regular corporation and could face a substantial tax liability. Our taxable REIT subsidiaries are subject to income tax.
• Complying with REIT requirements may cause us to forego otherwise attractive opportunities and limit our expansion opportunities.
• Complying with REIT requirements may force us to borrow to make distributions to stockholders.
• Our charter does not permit any individual (including certain entities treated as individuals for this purpose) to own more than 9.9% of our class A common stock or of our capital stock, and attempts to acquire our class A common stock or any of our capital stock in excess of this 9.9% limit would not be effective without a prior exemption from those prohibitions by our board of directors.
• We may choose to make distributions in our own stock, in which case you may be required to pay income taxes without receiving any cash dividends.
• Dividends payable by REITs do not qualify for the reduced tax rates available for some dividends.
• We are largely dependent on external sources of capital to finance our growth.
• Our investments in certain debt instruments may cause us to recognize “phantom income” for U.S. federal income tax purposes even though no cash payments have been received on the debt instruments, and certain modifications of such debt by us could cause the modified debt to not qualify as a good REIT asset, thereby jeopardizing our REIT qualification.
• The “taxable mortgage pool” rules may increase the taxes that we or our stockholders may incur, and may limit the manner in which we effect future securitizations.
• The failure of a mezzanine loan to qualify as a real estate asset could adversely affect our ability to qualify as a REIT.
• The failure of assets subject to repurchase agreements to qualify as real estate assets could adversely affect our ability to qualify as a REIT.
• Liquidation of assets may jeopardize our REIT qualification or create additional tax liability for us.
• Our ownership of and relationship with any TRS will be restricted, and a failure to comply with the restrictions would jeopardize our REIT status and may result in the application of a 100% excise tax.
• We may be subject to adverse legislative or regulatory tax changes that could increase our tax liability, reduce our operating flexibility and reduce the price of our class A common stock.
• The market price of our class A common stock has recently fluctuated significantly and may continue to do so.
• Some provisions of our charter and bylaws and Maryland law may deter takeover attempts, which may limit the opportunity of our stockholders to sell their shares at a favorable price.
• Our charter contains provisions that are designed to reduce or eliminate duties of Blackstone and our directors with respect to corporate opportunities and competitive activities.
• We have not established a minimum distribution payment level and we cannot assure you of our ability to pay distributions in the future.
• Investing in our class A common stock may involve a high degree of risk.
• Future issuances of equity or debt securities, which may include securities that would rank senior to our class A common stock, may adversely affect the market price of the shares of our class A common stock.
• We may invest in derivative instruments, which would subject us to increased risk of loss.
• Any warehouse facilities that we may obtain in the future may limit our ability to originate or acquire assets, and we may incur losses if the collateral is liquidated.
• We are subject to counterparty risk associated with our debt obligations.
• We may enter into hedging transactions that could expose us to contingent liabilities in the future.
• We may fail to qualify for, or choose not to elect, hedge accounting treatment.